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Financing Change for a One Planet Wales

Financing Change for a One Planet Wales

Utilising the income generating potential of community energy schemes to kick-start the transition to a low carbon economy

By Ken Moon

C3 Programme Coordinator

Wales Sustainability Reinvestment Trust

Like many of you we feel quite strongly that using resources in a linear way is never going to help us move closer to a sustainable future. And we think that the same applies to funding. So it’s something of a contradiction that so many of us have become dependent on linear funding for sustainability projects at a time when we have the opportunity to generate incomes for our communities through cyclical funding models.

As someone who has worked in both environmental and community sector grant funded projects over the last decade I know how important grant funding can be to help get projects off the ground and to deliver much need local services. And I also know that a lack of grant funding can seem like the thing that’s holding us back. If only we could get a grant, we could do all this great stuff!

But is grant funding always the most appropriate source of finance? Funding regimes can be incredibly restrictive and many projects and organisations which start with a truly transformational agenda often find themselves compromised by the need to secure additional funding in ‘new and innovative’ ways. Or they simply come to and end and all that energy and enthusiasm dissipates, potentially remerging somewhere else, and often leaving communities and ‘beneficiaries’ wondering where all the money disappeared to.

Add to this the recent, and ongoing, crises in the banking sector coupled with the cutting back of spending in the public sector, and many of us are finding that things are getting a little tight, whilst others are genuinely concerned for the future.

So has the relative abundance of grant funding in Wales over the last decade completely dulled our senses and closed our eyes to other sources of funding for our ideas and creativity?

Thankfully not, because while all this has been going on, we have also seen significant steps being taken to seek alternative forms of investment, and there are two key developments which have supported this:

1.      The rise in popularity of community share offers and the resurgence of the Industrial and Provident Society, especially around community energy generation. Well-known pioneers in this area are H2OPE & Energy for All.

2.      The use of on-line social marketing tools to engage with individual donors and investors such as the US based Kiva online lending platform, which since launching in 2008 has raised $171,531,725  (yes that’s over $171 million in a little over two years!) for borrowers in developing countries’ from individual investors.

image003What these two developments both have in common is that they are not asking people for donations or grants: what they are asking for is a loan, which will be repaid, with or without interest. Like it or loath it, this is how money is made; how ‘wealth’ is created.

With the introduction of the Feed-in-Tariff (FITs) community energy schemes are suddenly looking like an attractive proposition for communities looking to generate an independent source of income. And because they can generate reasonable returns they’re also a good investment and are able to raise loan finance as a viable business proposition. The State Aid implications of Feed in Tariffs also means that any scheme receiving over 200k Euros (£150 -160k)of government grants over three years are ineligible for the FITs. This makes loan finance a more attractive proposition for a community looking to maximise the income generating potential of their scheme.

However many communities are wary of loan finance, often through past experience, or for ideological reasons, and unfavourable terms can mean much of the profit accruing to the lender rather than the community. For the majority of community energy projects, their small scale, and the associated high costs of servicing a loan, mean they are un-attractive to the corporate banking sector which is more interested in larger schemes with greater profit margins.  This is where community share offers and social marketing come into their own.

Communities across Wales now have the opportunity to utilise grant funding, for example through Ynni’r Fro, Environment Wales and Rural Development programme, to investigate the potential to develop renewable energy schemes in their community. They can then establish community share offers, for example, through setting up an industrial and provident society and use online social marketing to secure additional investment for their schemes. With the high capital and low maintenance costs, the income generated can then be used to support additional community projects such as local food growing and community transport initiatives.

So is this what a sustainable funding model could look like for Wales? One in which people like you and me provide financial support to people and communities so that they can generate an income for themselves and move away from a culture of dependency.

With the financial pressure caused by the economic down-turn, now is the time to explore the ways in which communities can generate energy, cut carbon emissions, and even help finance other projects in the future. By taking a more innovative and imaginative view on where the funding comes from and how we use it, we can create localised revolving funds, which deliver for communities year on year.

At C3 we’re developing a national financing model for Wales, replicable at a local level, which will enable communities to secure capital investment, get off the ground, and start earning.  Funds can then be fed back so that other projects can derive the very same benefit. The more projects involved, the more we can put the future of communities back in the hands of communities themselves.

 

Ken Moon
C3 Programme Coordinator
Wales Sustainability Reinvestment Trust

This email address is being protected from spambots. You need JavaScript enabled to view it.

View the Wales SRT C3 presentation here:

http://www.sustainwales.com/home/en/members_area_agm.aspx 

Links:

  • http://www.wessexca.co.uk/index.phpimage006
  • http://www.h2ope.org.uk/
  • http://www.energy4all.co.uk/energy_home.asp
  • http://www.communityshares.org.uk/

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